UBS Maintains a 'Neutral' on J. C. Penney (JCP); Does Dividend Cut Signal Liquidity Risk?

UBS maintains a 'Neutral' on J. C. Penney (NYSE: JCP) price target cut from $36 to $29.

Analyst, Michael Binetti, said, "JCP reported 1Q adjusted EPS of -$0.25, -19% Same-Store Sales (SSS) and eliminated its dividend. We are trimming our '12 SSS forecast to -10% from -6.7% (to -15% in 2Q from -12%). That said, we are maintaining our 2012E EPS of $1.51 including pension ($2.06 excluding)—largely due to accelerated cost savings (est $650m in ‘12 vs $400m previously)."

"JCP's dividend cut raises concerns over cash levels thru the peak disruption period ($670m cash burn in 1Q, from $1.5b in 4Q). So far, we believe JCP can navigate holiday ’12 with cash from the div cut, and if it can deliver on operating cost saves & $500m of inventory reduction. We believe the risk of a draw on its revolving credit facility is a low probability concern at this point, but could be a risk if sales don’t stabilize, or if inventory reduction/cost savings targets don’t materialize."

For an analyst ratings summary and ratings history on J. C. Penney click here. For more ratings news on J. C. Penney click here.

Shares of J. C. Penney closed at $26.75 yesterday.

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